More sellers to become landlords

U.S. apartment vacancies are set to rise as a growing number of homeowners who can't find buyers for their properties seek tenants instead, Reis Inc., a real estate research firm says.

Landlords usually benefit from a drop in sales as potential buyers wait out the slump. That trend is reversing as a two-year decline deepens and the inventory of homes grows, New York-based Reis said in a report.

Reis projects that the U.S. apartment vacancy rate, 5.8 percent last year, will rise to 6.2 percent this year and stay there through 2009. The rate will start to drop again the following year, dipping to 6.1 percent in 2010, and decline to 5.9 percent in 2011, according to Reis' forecast.

Apartment vacancies also are being boosted by new construction, Reis said. In the first half of the year, 32,400 units were added to the market, and 62,300 units are set to be complete in the second half.

Because speculative development will be tempered by high construction costs and a large supply of homes and condos, "supply and demand will remain in relative parity through 2008 and 2009," the report.

While occupancy rates are declining, apartment rents are increasing, Reis said. The average asking rent nationwide in the second quarter rose 1.1 percent from the first quarter, to $1,002 a month, and the average effective rent rose 1.3 percent to $951. Concessions, such as free rent, dropped to a four-year low, Reis said.